There is no requirement to identify your race when filing your federal income tax return. Moreover, the US tax code does not have special provisions for racial groups. Just because the tax code is race-blind doesn’t mean it’s race-neutral.
For example, a recent study by the Tax Policy Center found that, on average, black couples face higher marriage tax costs than white couples. It’s part of a growing body of research showing that the tax code can create or exacerbate economic disparities between Black households and Whites. households.
The study provides empirical evidence for this seminal work by lawyers Dorothy Brown, Beverly Moran, and William Whitford raised the possibility of racial inequality in the tax code.
In general, when U.S. taxpayers of any race get married, they can face either a “marriage penalty” or a “marriage bonus,” meaning they pay more or less tax than two singles as a married couple.
The penalties are greater when both of the penalties work as opposed to one-win pairs. And when the two spouses each earn about the same amount of money, they are higher. Penalties are also more severe if there are children.
If the financial facts of a black married couple were the same as that of a white married couple, there would be no difference in their tax burden, said William Gale, co-author of the Tax Policy Center and co-author of the marriage study.
But the economic facts of Blacks and Whites are different on average.
For example, black married couples are more likely to live in two-earner households; each spouse is more likely to earn the same amount as the other; and they are more likely to be patrons.
“We find that black couples are subject to more marital income tax penalties and face higher penalties than white couples. We show that these patterns arise because black couples who control income have more equal earnings than white couples…and black couples are more likely to be dependents,” the report authors write.
Among couples who received a marriage penalty, black couples paid less in dollars ($1,804), the researchers found. $2,091 vs.), but more as a share of their income than White couples (1.8% vs. 1.4%).
When the researchers focused specifically on households with adjusted gross income between $50,000 and $100,000 under the 2018 tax law, they found that 59% of black couples faced a marriage penalty, compared to 51% of white couples. Black couples paid about $150 more on average.
Only 33% of black couples receive a marriage bonus, compared to 44% of whites, and those bonuses are about $170 less on average.
“Taken together, black couples in this income bracket paid an average of $358 in net penalties. White couples in this income bracket received an average net bonus of $61,” the report said.
The researchers found a similar pattern among most other income groups.
The TPC study comes after the U.S. Treasury released details on how to account for race and ethnicity in tax data — an effort in response to President Joe Biden’s executive order directing government agencies to better measure and improve racial equity.
However, the TPC authors note in a blog post that “there is no easy solution to racial disparities in the tax treatment of marriage in a tax code that does not explicitly refer to race.”
One option could be to allow married couples to file as singles, they said – although that would “make the tax code less progressive and open up new opportunities for tax avoidance”.
Gale said it’s still early days to detail how tax and other federal policies affect racial equity and how disparities can be remedied. “Maybe we are in the second innings. There is a lot of work to be done.”